Press Release - States and Territories are Key to Reducing Household Insurance Costs [24/02/2003]
C011/03
24 February 2003
STATES AND TERRITORIES ARE KEY TO REDUCING HOUSEHOLD INSURANCE
COSTS
Minister for Revenue and Assistant Treasurer, Senator Helen Coonan, today
said that a Commonwealth review of taxes affecting the affordability of household
insurance is likely to be of limited value because of high State and Territory
taxes.
"The primary cause of high taxation levels on insurance is the large
stamp duties and fire services levies imposed by State and Territory Labor Governments,"
Senator Coonan said.
"The States and Territories all impose stamp duty on household insurance
policies and in addition, NSW and Victoria also impose fire or emergency services
levies.
"The fire services levy would have to be the most inequitable of all
taxes as the people who pay for insurance end up paying the levy, yet everyone
in the community has access to their services.
"So not only does this tax increase the cost of insurance, it actually
penalises people for being responsible and insuring themselves against adverse
events."
An international comparison of taxation on insurance undertaken by Deloitte
Touche Tohmatsu last year found that Victoria has the highest level of taxation
on insurance in the world and that New South Wales comes in second.
"States and Territories can make a positive and immediate impact on premiums
and I will seek to put this issue on the agenda at the next Ministerial meeting
in April."
The Insurance Council of Australia today also called for the Commonwealth
Government to look at tax deductions for household insurance.
"The Howard Government has already conducted preliminary estimates but
we are not convinced this expenditure would result in significant improvements
in the take up of insurance in Australia.
"A 30 per cent tax rebate would cost around $700 million per annum and
tax deductibility would cost around $1 billion per annum.
"Given that three out of four households already have home insurance,
a large proportion of any Government expenditure would be directed at people
that already have insurance, rather than at encouraging more people to insure.
"A tax deduction for example, would favour people with relatively higher
taxable incomes.
"Lower income households, which would also tend to be more likely to
go without insurance, will receive a relatively lower benefit and the change
in premiums may not be sufficient to induce people to buy insurance."